Todays Music to blog by:

The race against the cashrate clock

Since the interest rate rise is the news of the week, I thought we might go over the timing issue of how long it takes for a rate rise to flow through.

The big problem here is that the rate rise doesn’t coincide with the polling cycle in a consistent manner, so sometimes polls will be taken a day after the rise, sometimes nearly a fortnight after the rise – and for us here trying to get a statistical grip on whether the rate rise will come through in the next three weeks, well it all becomes a little cloudy.

But first, let’s go to what we do know.

We know that when a rate rise happens, it boosts both the ALP primary vote and the TPP vote, we saw that the other day.

If we use the monthly averages of Newspoll, we can regress the change in that monthly average (if the TPP goes from 52 to 54, the change would be +2 for example) with the change in the cash rate (if the cash rate rises from 6.5 to 6.75, the change would be +0.25 for example). When we do that we find that there isn’t a statistically significant relationship between the change in the ALP TPP vote and the change in the cash rate during the month that the RBA lifts rates. But if we lag the change in the cash rate by one period, where we are measuring the relationship between the change in the ALP TPP vote with the change in the cash rate in the previous month, out pops the following:

Where D(TPPALP) = the first difference of the ALP TPP vote, which is the monthly change in the ALP two party preferred vote
D(cashrate(-1)) = the first difference of the cash rate lagged one period, which is the change in the cash rate in the previous month.

The coefficient on D(cashrate(-1)) is what we are interested in here, and it tells us that when the cash rate lifts by 1 percent, the ALP TPP in the next month jumps by 7 points. So when the cash rate lifts by 0.25 percentage points, the ALP TPP vote increases by over 1.5 percentage points. The t-Statistic and the Prob value tell us that this relationship is highly statistically significant.

The little graph in the mix shows how it plays out, where the black line represents a change in the cash rate in the previous month, and how it plays out with the change in the ALP two party preferred vote. Notice how the black line spikes when the red line spikes? That’s the visualisation of the relationship we are measuring.

So we would ordinarily expect that the ALP would get a boost in December from the November rate rise.

But when we try to bring that resolution of the data down to the poll by poll level, we run into the problem of the polling cycle not being consistent with the RBA cash rate announcements.

If we graph the change in the cash rate (the blue triangles) against the change in the ALP TPP using every Newspoll since the last election we get:

As you can see, when the cash rate changes, sometimes the ALP vote goes up with it, sometimes the ALP vote goes up the next poll and sometimes the poll after that.

The problem here also, is that there is a fair bit of random movement (sampling error) that might be polluting the monthly change in the ALP TPP vote that can’t really be cleaned up unless we use something like monthly averages.

So the big question becomes whether or not the election campaign compresses the reaction time of voters when it comes to a change in the cash rate?

Let me state to begin with that I don’t believe a word of this guff about how interest rates will shift the focus back to the economy and that will somehow benefit the Coalition. I’d like to see some evidence of that proposition, and the Newspoll “better economic managers” results aren’t evidence as there’s no statistical relationship between the Newspoll economic management question and the Coalition vote at all, and only a small, marginal relationship for the ALP.

The big question based on the actual historical evidence is one simply of time – a lack of it for the ALP or just enough for the Coalition.

steve_esaid

From yesterday’s rate rise until 24/11 there will be at least the following polls: 3 Nielson, 2 Newspoll and 1 Galaxy. In the graphs shown above, there may be periods of time when poll data is not available near to interest rate increases. The next 2 weeks will show if the 1.5% increase in the TPP (that is expected) comes to pass.

Support for the ALP as a result of the economic distress from interest rate increases is expected. Why did the LIBS make the promise of low interest rates in the 2004 Election if this expected outcome is not the case. If the LIBS gained from low interets rates, then logically they must loose support from high interest rates.

The Doctorsaid

Re: “better economic managers” results ;
Didn’t one of the other pollsters have three-way selection on that question – Libs better (40), the same (40) and Labor better (12), the rest presumably undecided. This probably tells the real situation better than Newspoll binary question, and you could argue that people prefer Labor’s economic management skills!

It is nearing the end of the 41st century, and there is a large amount of discontent
amongst the people. The presiding emperor and his right hand men Lord Smirk and Darth Wentworth
have used their power in the senate to build a weapon with the potential for large scale devastation,
A small space station called the WorkStar.

A group of rebels who call themselves “The Opposition” have vowed to tear up the WorkStar,
they are lead by Kevin Ruddwalker and are presently on their flagship, the Griffith current in
orbit around the planet Wilderness. Other rebels include Kevins second in command Julia,
and two droids, P2-GR8 and M3-T0.

The commander of WorkStar has identified several flaws with the WorkStar, these were remedied
by adding the Fairness Test to the WorkStar.

Bridge of the Opposition, where Ruddwalker is entering.

“What is it ?”.
“A bounty has been put on your head, here have a look” says Julia.

The monitor plays showing footage of Lord Smirk, “Kevin Ruddwalker is a condemned man,
he has had past associations with known criminals, including Burke the Hutt. We know they
met at Perugino’s, We know his wife has had questionable business dealings, is inexperienced,
and most importantly…”

The monitor shows static and then returns.

Lord Smirk continues “Most importantly, he wants to tear up the WorkStar.”

“Turn it off.” said Kevin.
“What are you going to do?”
“I’m going to challenge the emperor to a duel, and whoever wins can do what he likes to the WorkStar.”

“What is it P2?”, P2 activates the holo player that sits in his shiny dome and a picture of the Emperor
appears.

“Kevin Ruddwalker, I have accepted your duel, Meet me at the Great Hall on the Vermon planet
in the Capital Territories this sunday night. To make the duel interesting, there will
be several mercenaries who will start shooting at us part way through, if your still alive then”.

Kevin reaches over the the comm system, “Captain, set a course for the Vermon planet in the
Capital Territories”. Kevin works at the terminal some more until a picture of an older man appears

“Senator Brown”,
“Kevin Ruddwalker”,
“Senator, we have had our differences in the past and still dont see eye to eye on some things,
but i need your help to rid us of the WorkStar through your political influence, is there
anything you can do ?”
“My sources tell me that we will be able to increase our presence in the Senate from the
Capital Territories, It may not destroy the WorkStar, but it will stop the Senate increasing
its power.”
“Thank you Senator.”
“Good luck Ruddwalker”.

Shortly after, Julia walked in and asked “Was the Senator able to help?”

Ruddwalker started to respond “He said that he….” but stopped mid sentence and
moved over, sitting down pre-occupied apparently suffering pain.

“What happened, are you ok?”
“I felt a disturbance in the force, as if something has gone missing…Where are we now?”
“We just passed throught the Calare system, Are you alright?”
“I should be fine, it seems to be passing now. I’d like to lie down”.

Julia left and Kevin went to sleep….

“Kevin….. Kevin Ruddwalker” said a familiar voice.
“Wayne, is that you ?” he said while still half asleep.

Looking around the room, he saw the ghost of a ageing man standing near the doorway.
“Kevin, you must go to the Kyoto system”.
“Master Andren. it was you I felt.”
“Yes, Remember my words, the Kyoto System” he said and then faded away.

After the Opposition entered the Vermon System, Ruddwalker went down to the great hall
in a shuttle with P2-GR8 and M3-T0 for the duel with the Emperor.

They entered the hall across from the Emperor and met in the middle of the chamber
with a third man.

“I will be the moderator of this duel, and it will be conducted in the following format,
This will be between just Ruddwalker and the Emperor, there will be no help from anyone
associated with either party, and if the duel lasts longer than a few minutes, the
five mercenaries in the middle will start shooting, Are there any questions ?”

Ruddwalker answers “No”.
The Emperor looks as the ground and says “Whats that on the ground, it looks like a worm,
can someone do something about it”

The Moderator pulls out a blaster and aims it at the worm and fires, BLAM!. The worm is enveloped
in a cloud of smoke, but remains there, still wriggling. BLAM!. The worm isnt affected. “I guess there
is nothing we can do about it, gentlemen you may begin the duel”.

Lightsabers ignite and Ruddwalker begins the attack, which was defended by the Emperor. The fight
continues on pretty even ground until one of the mercenaries fired a shot at the Emperor, which
he blocked. But while blocking, his muscles started twitching before recovering.

Shortly after, the Moderator stepped in, stopping the fight “We are out of time, Neither of
you has managed to land a fatal blow, and this duel will have to be called a draw. Under
the Rules of this duel, duellers will have safe passage off world”.

As Ruddwalker returns to his shuttle he was joined by P2-GR8 and M3-T0.

P2-GR8 bleeped positively.
“Thanks P2″.
M3-T0 stated “Master, it appears that my help preparing you for the duel paid off.”
“Yes M3, you helped a lot, things could have turned out a lot differently if you hadn’t helped.”

As they reached the Shuttle bay, they were stopped from opening the Shuttle door by its
security system. Its monitor read “Name the Current Tax Rates and the Thresholds which the
rates kick in.”.
Ruddwalker stopped, paused and said “Wayne told me these would be important. ummm. I think
the top tax rate kicks in at a hundred and seventy five thousand, and it cascades down from there”.

An alarm sounds, and the screen flashes “You couldn’t name a single rate, You couldn’t name a single
threshold”.

P2-GR8 rolls over to the shuttle and plugs in his computer interface, bleeping angrily.
Ruddwalker asks “M3, What’s he saying ?”
M3 Responds “Hes saying something about ch..” and before he finishes the door opens and
Ruddwalker interrupts, “Never mind, lets get out of here”.

The shuttle takes off, going into orbit to dock with the Opposition.

Just as the shuttle breaks atmosphere, Ruddwalker turns to M3-T0 and asks
“What was P2-GR8 going on about earlier”.
M3-T0 replies, “He was saying that we should just change the password to the shuttle”
Ruddwalker asks “And how are we going to do that”.
M3-T0 explains “Well he was rolling around while you were duelling and concluded that
after we destroy the WorkStar, that you’d be powerful enough to do whatever you wanted,
that you could change anything”.
P2-GR8 beeps a bit longer.
Ruddwalker asks “And you told this to another droid while waiting in the Starport ?!?”.
P2-GR8 beeps apologetically.

Darth Wentworth is talking in the War room, “He poses a threat, significant threat, and
although we havent been to the Kyoto System, its not far out of our way, were almost practically
going to go right past it, i think we have to go there….”.

He’s interrupted by the Emperor, “Darth Wentworth, you know my position on this, we have already
voted not to go there, i dont want to hear any more about it”.

Lord Smirk adds under his breath “I wish you’d been the one that had lunch with Burke the Hutt”

Out in deep space, the Rebel fleet is amassing, with plans to destroy the WorkStar.
A hundred and fifty Rebel ships have rallied for the attack and while some captains are
sure they will survive the attack, others hopeful, there is slight smell of hubris in the air.

Ruddwalker makes a final address to the captains of the ships, “Can i just say that it has taken
us three years to get to this point, a point were we can make a difference, Today we will hopefully
see the day where we tear up the WorkStar and throw it out the back door”.

“I know were going to win, Why ?, because after this is done, I’ll head to the Kyoto system. But before
i go, there is a problem we must deal with first the Fairness Test. “.

Julia spoke up, “I’ll go and take a team to neutralise that”.

Ruddwalker finished “Very well, you’ll depart in an hour. I’ll depart sooner and board the WorkStar to
face the Emperor. He will want to destroy me personally, It wont happen, but i’ll give him that
chance. Ruddwalker out.”.

Meanwhile, On the WorkStar, a monitor turned off and figure walks out of the room.

Ruddwalkers ship goes to hyperspace, after emerging by the Workstar, he boards a shuttle.
He is greeted by Lord Smirk and taken to the Emperor. On the way Ruddwalker says
“You could have had it you know, If you’d have had the courage and conviction to summon
forth the courage and conviction you could have you could challenged the Emperor and you
could have been Emperor.”

“What did you just say ?, never mind. I’ll be Emperor, he’s promised to stand down and
hand over to me once we put down your rebellion. We know your fleet is coming. We know
all about your fleet. Did you have trouble replacing the Corio ?”.

“At short notice, we had to get another ship, its quite as big and the Corio will
be here anyway, it just won’t come with us.”

“Well your still young and inexperienced, we shall soon see who is left standing after this. ”

They enter the Emperors chamber to find the Emperor waiting with Darth Wentworth.

The Emperor says as they come in “Excellent, you will be here to admit defeat as your
fleet is destroyed”, then presses a button on his chair. ” Captain, make sure all weapons
are online, including the main pork gun”.
“My Lord, the pork-barrels are being warmed up as we speak”.

The emperor turns to Kevin Ruddwalker and says “Any final words ?”.

Ruddwalker pulls out a holo player and says “One of my men couldn’t be here, and i promised
him i’d do this. Can i just say….”

Ruddwalker corrects himself, “Can he just say this.” as he presses play on his holo player.

An holograph of a man taking a picture of himself in the mirror is displayed.

Ruddwalker says “That’s not it” and quickly presses a button.

The holograph changes to show a man speaking in a green room with a man behind him
with his finger in his ear. Ruddwalker mutters “That’s not it… here it is”.

It shows a man wearing suspenders who starts speaking “John’s Gone.
You know that. I’ll be Back, I’ll be Back.” before he walks away smiling.

The comm beeps, and a voice says “My Lord, they have arrived”.

The Emperor replies “Fire the main gun, Use Maximum Pork on the first shot.”

Lasers erupt from the main gun and shoot straight into the fleet, destroying a ship.

On the Bridge of the Opposition a console operator reports “They’ve destroyed the O’Conner”.
Julia comments “I’m surprised she even got this far, I’m going after the Fairness Test,
hold off the main attack until its neutralised”.

Back on the WorkStar, The Emperor stands up and says “Enough of this, Lord Smirk deal with
him”.

Lightsabers ignite and battle ensues. During the battle the WorkStar starts shuddering,
presumably from the Rebel assault. The duel is interrupted by the comm beeping and
someone saying “My Lord, the guns are firing, they are having limited effect, what should
we do?”.
“Continue firing, use all pork-barrels, everything you’ve got, we can’t lose”.

Lord Smirk hears this mid battle and knocks Kevin Ruddwalker off his feet and
onto the floor, screams “You can’t do that, you KNOW you can’t do that, It’ll destroy
the generators” and rushes to the exit to stop the firing.

As Ruddwalker gets up and dusts himself off, he says “I knew he wouldn’t go through with it”
in unison with the Emperor, resulting in a double take.

Outside the space battle continues, and the fleet gets a message from Julia on the flagship
“We’ve done what we can with the Fairness Test, Press the attack”. The guns from the Rebels
open up and start to inflict damage on the WorkStar, but the damage isnt uniform.

Back in the Emperors chamber, the unimpressed Emperor gets up and says “We may not be able to
destroy your fleet, but i’ll have the comfort of knowing that you will not live out today” and
sends bolts of lighting towards Ruddwalker.

Ruddwalker goes down in agony, and as he recovers begins to speak but cant get words out.
The Emperor says to Darth Wentworth “Finish Him and you’ll take the place of Lord Smirk.”.

Darth Wentworth stands beside the Emperor taunting Ruddwalker “We knew you’d never win Ruddwalker,
We’ve heard what your plans are and that your droid said your going to change everything. But before i
Finsh you, tell me one thing, were you really going to go to the Kyoto System ?”.

The Emperor sends another bolt of lighting to Ruddwalker and says “Darth Wentworth!. Finish Him!”.

Ruddwalker, still in pain from the last bolt, yells out a painful “Yes!.”.

As he says that, Darth Wentworth moves towards the Emperor. The Emperor, detecting treachery
hits Darth Wentworth with a bolt of lighting, but he has enough momentum to pick him up and
throw him down the nearby shaft before collapsing to the ground from the lighting.

Ruddwalker now mostly recovered, moves over to Darth Wentworth and says “Come with us, its
not too late, we can go to the Kyoto system together.”

Darth Wentworth quietly says “Its too late for me, go, before it explodes”. With that Ruddwalker
makes for the Shuttle bay.

As he leaves, the console at the Emperors chair crackles to life again ” My Lord, weve suffered damage
in the following sections, Curtin, Berowra, Warringah and the following have been destroyed, Paterson,
Wakefield, and Solomon. North Sydney has been severly damaged. If that goes the whole
station will go. Or is it the other way around? Either way, we’re in trouble.”.

At the control station, the operator makes double sure his microphone is off before
saying to the operator next to him “Who comes up with these names? It was much simpler when
we had a main reactor”.
“I know what you mean, What does North Sydney do again” said the other
“I’m not sure, But it’s integral to the WorkStar and makes a lot of noise, that’s all i know”.

Ruddwalker makes his way to the shuttle bay, and as he presses the button to open the
shuttle door, he remembers the security system.The monitor reads “Name the Current Tax Rates
and the Thresholds which the rates kick in.”.

Ruddwalker loudly states “That’s Bullshit”, pauses shakes his head, looks around and says to
nobody “hey that wasn’t me, i know it wasnt me. I didnt say that. Why?. Because I’m not 30 minutes late.”
he then thinks out aloud “What was it that Wayne was telling me would work?…..”

Ruddwalker remembers and says to the shuttle “Education Rebate”. The shuttle door opens.

Shortly after leaving the WorkStar shuttlebay with engines at full power, Ruddwalker turns on the Comm
“Julia, how are you going ?”

“Get out of there, its about to explode.”.

Just then the WorkStar explodes behind him. The shuttle is rocked by the shock but stabilises.

Ruddwalker returns to the comm “Hows the fleet?”.

“Much better than expected, we brought a hundred and fifty ships plus a few Freelancers.
We still have around a hundred and ten including the Lilley, Grayndler, Melbourne and Gellibrand.
Surprisingly the Bennelong, and Hinkler survived.”

“What about the Corio, and Higgins?”

“The Corio didnt survive, although it put up a tough fight. The Higgins was lost”.

“Thanks Julia, i’ll be back on board the Kingsford-Smith shortly, and i’ll celebrate when I
meet you and the Fleet in the Capital Territores in due season.
P2 and I are leaving for the Kyoto System as soon as we can”

Ruddwalker entered his room to shower. As he entered he saw the ghostly figure again.
“Master Andren”.
“Congratulations Kevin, I wish i could have seen it in person. If your efforts in the Senate are
successful, Remember to stay away from the Dark Side, forever will it tempt you”.
“I will Master”.

Shortly after Ruddwalker and P2-GR8 entered hyperspace for the Kyoto System.
=====================================================

Possum Comitatussaid

Kevin Bradysaid

It is conceivable that the average punter has already factored in an expectation of an interest rate rise to their voting intention. As you say, poss, there is a fair degree of variability in the polls (noise) but the TPP is fairly constant. As KeepingALidOnIt said in a previous thread – there must be an upper limit here somewhere – or are we expecting John Howard to vote Labor too?

There are a couple of hypotheses here, which would require the campaign to continue until Christmas to get some really meaningful data on:
H1 – Voters come back to the government during an election campaign (The “Narrowing”). Might be seeing some evidence of this but it is slow and needs about three months if the polls are correct.
H2 – Voters switch to Labor because of interest rate changes. Seems there is likely to be a time lag here, so again we need to hold the polls until Christmas.
Either way, to be genuinely scientific about this tuff, we can’t have the election on November 24. Sorry folks!

Severinsaid

There appears to be a lot of merit in your analysis, but I wonder whether there is a natural limit to the amount of voters who would change their vote based on interest rates. Given the interest rate scare mongering of the last election campaign, I would assume that everyone who was so inclined would have voted for the coalition in 2004, but there must be a limit to the number who are willing to switch for this reason alone. Are we at the limit already?
The good thing for Labor is that it is hard to see the voters who have switched due to their perceptions of being mislead and/or pain from interest rates switching back on another scare campaign.

Possum Comitatussaid

There probably is a law of diminishing returns applicable to voters switching on the basis of interest rate rises. The Rudd leadership might also have taken a fair chunk of that prospective group anyway. So saying, there is still a jump in the ALP vote the month after the rate change, including the last rate rise – at this stage, they might just be those annoying newsvoters that keep changing their mind who to vote for every second week. I wish those folks would make up their mind one way of the other – it’s interfering with the modeling! :mrgreen:

Kate Ellis for PMsaid

I think when voters with mortgages receive letters in the mail from their lenders they will get their bats out. This might happen in the last week before election and will probably shift the TPP by 2-3%. We will probably see a small shift to Labor in the next Newspoll, but it may have nothing to do with interest rates- the big movement will come just before 24 Nov, when it really counts. I am no expert on polls or elections, but I can sense what is going on in my local voterland.

Puffsaid

At the risk of sounding like a GG journo, just thought I’d raise what (superficially at least) looks to be something of an inconsistency in your commentary. I’d be glad to hear where my recall or (very basic) understanding is out of whack, or failing that how else you might distinguish the two cases.

In discussions surrounding the Crosby Textor Oz Track 33 I recall you discussing that the Libs would have to campaign very narrowly, on just a few issues, because every time they raised issues that Labor ‘owned’ (such as industrial relations or the environment) they just reinforced the existing mood of the electorate.

Isn’t the corollary of this argument that if the electorate’s mind is focussed upon rates, and by extension ‘managing the economy’ (one of the few areas in which the Liberal party is popularly considered to be stronger) this helps the Libs?

Is it possible to run the correlation between Hawke/keating interest rates and Lib 2PP? And Howard the (uninspired) Treasurer’s interest rate rises against ALP 2PP back then? Both of these went much higher than the current set of 10 rate rises so far

smssivasaid

Puffsaid

I’m not suggesting for a moment that we’re about to witness hordes of mortgage holders jumping back onto the Libs because their payments are about to go up.

But I’d just like to hear how a far more clever and insightful mind than my own would reconcile this with Poss’ earlier analysis of how the Libs had been forced into a tight corner by the ALP’s ‘ownership’ of certain issues.

Possum Comitatussaid

Focusing on rates could help the Libs if the power of “low interest rates” as an issue was greater than the big bag of other issues that are stuck on the ALP side, as well as the Libs maintaining good positioning on it.

But the rate rise would have hit that a bit in terms of both influence and positioning for the Libs. So for the Libs to get a vote boost out it, the “low interest rate” issue still has to be a larger influence for a large group of people than a whole big collective bag of other issues on the ALP side, but now the lower interest rate spiel is probably coming off a lower influence base.

Unfortunately Tom, I dont have good TPP figures going back earlier than the late 80s.

John V Ksaid

The interest rate timing this time is real hoopla in the mainstream media, the coverage has been a blanket, for the first time in an election period the RBA increase interest rates. So mortgagors nationwide have had it amplified, if anything this is not going to make the impact in voting intentions lag further out as and has been seen and demonstrated it is definitely not a plus for the government no matter what spin some coalition journalists try to put on it.

Secondly all mortgage holders/voters are not going to react in the same moment in time, there must be some kind of normal distribution to the timing of their behaviours, depending on things exactly how much financial pressure they are under and/or how much they understand their disposable income situation, whether it takes the bank letter to make them act or just the news etc.

So reasonably, though Labor may not get the full effect in their 2PP immediately one would expect them to get some of the benefit in the lead up time, shoring up the true wavering undecideds to a degree. In other words taking the newspoll 2PP of this week which may be low because of the preference distribution anomalies, if a slight narrowing is on this will either halt it or start to reverse it.

The media were all over it, there wasn’t a mortgagor anywhere who did’nt hear it and also it was out there for two full weeks before the announcement. So the announcement had a crystallisation date, it was in the news cycle far earlier than any other rate rises which tend to be news two days before at most.

If the 2PP move is coming it more likely to come quicker this time around and it may be amplified this time and with a larger drop back effect which wont matter because it will because it will be after the election.

Kirribilli Removalssaid

Good point John V K, the electorate is having this rate pushed in their faces and it’s got JWH’s grubby little paws all over it.

Those outer Sydney mortgage belt people (nd their counterparts all over the country) who borrowed up to their noses and are now drowning, are going to leave the Rodent in droves this time, because he virtually assured them everything was going to be fine under his superior management. We all know that was a lie, we all know he made it, but those who went out and borrowed heavily to get into an already inflated house market will come armed with baseball bats on the 24th.

Ironically, these were the Howard Battlers, and now they’ll become the “Howard Batters” (registered Trade Mark…you read it here first!)

CL de Footscraysaid

Possum, thanks yet again. Given that this rate rise has had more attention than almost any other in memory, and given that the issue of rates is already on the radar, and given that we are actually pressing people to make a decision on political matters, one might argue that these factors would tend to compress the previously observed lag. We’ll find out, no doubt.

It is hard to understand the mechanism via which a rate rise would shift anyone from Labor to the Coalition. It may shift some from the Coalition to Labor (especially ‘soft’ coalition voters – there must be some of them!)in the short term and more in the lnger term.

I can’t see how it would help the libs. The explanation of the lag would be that it takes people a while to work out how much extra they’re actually paying – they don’t get annoyed until they’re actually paying it (on the principle that something that actually happens is far more important than something which is forecast, but hasn’t actually happened). We tend to discount things in the future, after all.

I guess we won’t now for a few months, but my guess(!!!) is that the election ‘hothouse’ will compress the lag a bit. It would be astonishing if there was any drift to the libs over this.

happy chap from Griffithsaid

I think Kate is on the money. There is probably an instant shift when the rate rise news comes out, but it’ll only be as the mortgage payments are effected will the full shift occur. At the most, someone is going to find out half their interest increase before the election if their payment is due on 23rd November (as we’re only half a month away).

The only thing that could make the rise more of an issue before the poll is if the banks decide to pull a whacky and put their rates up by 50 points today.

That, and a bit of fear from the ALP and meeja hammering home that another 2 rises are likely in the next few months. Of course, the ALP won’t be able to prevent that, but they can bloody well point the finger in the next two weeks. I still reckon it’ll be 56% TTP for the ALP.

seansaid

The theory that interest rate rises will push the campaign toward the coalition strength of economic management and in doing so win them back support is based totally on the Newspoll data in which a majority nominate the govt as the better economic manager. Denis Shanaghan and all the other lackeys at News Limited are clinging onto that stat like shipwrecked sailors on a plank of wood. Surely if we go up sh.t crick economically people will look to the sure and steady hand of howard and capt smirk.

As Possum points out its a flawed theory since there’s no correlation between ‘better economic manager’ and voting intentions. THe best proof of this is the fact that Keating far outranked Howard in polls related to the ‘better economic manager’ in the lead up to the 96 election. Incumbent govts always tend to do better on that question. At the time Howard (like labor now) was still getting some heat from his previous dismal record as treasurer. He of course romped in. It didnt hold true then and it won’t now – somebody needs to tell Dennis and Caroline though….

John V Ksaid

The timing could not have been worse for Howard and Crew and now the unemployment dark side of the force has moved against the Coalition, it almost appears to be a sacking going on, a conspiracy.

“The workstar is exploding. I cannae hold her Captain”, screams Lord Smirk in a high pitched whine, “I’m looking for a job with Kirk on the free Enterprise, the uniforms are nicer, stuff that wearing a suit when the proles come leaping the barrier, I’ll be in a Galaxy a far way a way”.

“Every man for himself and fark the Captain” as he leaps into the escape pod.

Peachysaid

stevetsaid

El Nino, I have a mortgage with one of the majors and it actually takes them about a couple of months to pass on the rise. They haven’t even caught up to the last one yet. Not all of the banks are that slow, but I have a funny feeling their last one will be added on probably within the next couple of weeks which will remind people very nicely of what has just happened.

stevetsaid

George, I thought that was a truly bizarre and surreal statement today for a number of reasons:

1. To say that the tax cuts will make up for the pain of an interest rate rise will leave a bitter taste in people’s mouths. It’s a case of the government giving with one hand and taking with another.
2. To backtrack on his word just proves what a liar and how untrustworthy he is.
3. To make a comparison to the refusal to apologise to the indigenous population…well…a lot of people who live out in the mortgage belt are racist and don’t think aborigines deserve an apology, but they won’t like the comparison and will think they do in fact deserve an apology.
4. To accept full responsibility and say we are proud of it, that’s just downright arrogant, and he is really just spitting in people’s faces.
5. As has been pointed out before, the Libs message has been all over the place in the campaign, and this is just another grand example of it.

rodsaid

Very good lagged analysis. Great to see some empirical work being done to debunk the myths. Obviously the Government didn’t see this rise coming unlike just about everyone else. I also wonder just how relative “economic management” skills or otherwise play out with the electorate. Its just too hard for most people to understand even if they were interested.

Aspirational Aspirationalistsaid

“whether or not the election campaign compresses the reaction time of voters when it comes to a change in the cash rate?”

I believe that this rate rise will have a quicker reaction as the lead up mentioning of rate rises would have made people aware of it, coming from the days before that its almost certain we were going to get one and the election campaign highlighting it.

Most people think of 25-40 year old people being affected with the money borrowed against the home, has anyone taken into account the effect of the interest rate rises on the people with reverse mortgages. Do reverse mortgages allow fixing ? I think there could be some very angry people that are shocked they now “own” less of their house than before.

Steve_Esaid

Rents will also rise as interest rates push up the holding costs of investment property.

The stress will therefore cover both new mortgages and those who rent (and you can expect want to be able to have a mortgage). These electorates have been well covered and are mainly in the suburban capital cities. Those not so marginal seats with swings required of 4-10% for a change of control.

rosscosaid

Maybe, just maybe, some voters may be taken in by the increased interest rates are due to superior economic management argument, but I would have thought they would have been Liberal voters anyway. If there are any Labor voters prepared to switch to the Libs based on this spin, I would expect them to be outnumbered by angry Lib voters who would want to have a shot at Howard.
At the worst those swapping votes either way would cancel each other out. Maintaining the status quo won’t do it for the Libs, they desparately need a “catch up” issue.

Troy Csaid

The betting markets would appear to disagree with much of the commentary: Yesterday’s media release from Sportingbet said, “In an unexpected shift, punters have flocked to the Coalition since this morning’s rate rise with 96% of money bet with Australia’s biggest bookmaker, Sportingbet Australia, going to the Coalition since the Reserve Bank’s announcement was made.”

Rodsaid

Sorry, Troy, but Australians bet a heap on Master O’Reilly yesterday. According to the Herald Sun he was beaten 600 metres out. That seems pretty close to where we are in this election!

Sorry, did I say “Sorry”? I apologise. I didn’t mean “Sorry” to sound like an apology. Heck, I only take credit for the good stuff!

Sorry. Err, I mean, I’m not apologising. If you are about to lose your house then get stuffed. Err, no, I didn’t mean that. I’m really, really, really sorry that you are getting shafted by our really wonderful, wonderful, economy.

Make sure you tell your kids that its not John Howard’s fault if they have to share a bedroom in that new place you are renting now that you can’t afford the mortgage. You know, the place that you weren’t going to even think about until John said things would be really, really cheap! Heck, whose fault is it if you can’t negotiate a decent pay rate one on one with your multi-national boss and his bevy of corporate lawyers! Certainly not mine or John Howard’s!

Sorry! er, did I say that? I’m sure I didn’t mean to. What the heck! Wollstonecraft is a fine place to live, my parliamentary salary would have paid it off years ago if the conveyancing fees at my suburban legal practice hadn’t already done so!, My super, despite that asshole Latham’s attacks, will keep me going for a couple of centuries too!

Sorry! Get stuffed! You bought Children Overboard. You bought Tampa. You bought WMD’s in Iraq. You bought “Native Title will steal your Hills Hoist and eat your babies”. You bought the “NT Intervention” and “overseas processing” and almost anything else I’ve dished up! I’m sure you’ll buy this too, even when I say that “sorry” means I’m not apologising! Heck, I’m a suburban lawyer at heart. Do your REALLY imagine I mean what I say!

Enjoyed Antony’s wonderfully apt parting observation suggesting that Team Rodent would have to put in a finish like Efficient to win.
And we all know who backed Efficient when his nag was scratched and he refused to play “me too” with the third placegetter, don’t we?

Burgeysaid

Anyone see Agenda tonight? 5 pieces of pro-lib spin in the first 2 minutes.

This one from Speers was the doozy – The PM made it clear that when he said sorry he wasn’t apologising, and “lest anyone be confused he spoke again tonight about it and made his position clear that it wasn’this fault”.

Georgesaid

Hey Burgey, I wonder when ministers will stop associating themselves with Howard, so as to at least give themselves a fighting chance in remaining as part of an oposition. Or maybe they know they’ll be “cleaned” out as part of the blood letting that will ensue after the 24th.

Martinsaid

I disagree Burgey, i really doubt Speers was going into bat for the rodent…I think he was just a bit shocked at the ferocity of Kieran Gilbert’s attack on the PM.

but the footage of that frightened, old, possibly ill man desperately dissembling before the camera – trying to snatch back a disastrous final week ad free kick for Labor – that was tragic. and how about the look on Pete’s face when the rodent said “i’m not apologising” for interest rates?? OUCH

Georgesaid

Dansaid

I’ve already flagged this over at poll bludger, but the Nationals just ran maybe a 3 minute ad on the ABC at 9:30, cut screens and all. Would have to have been approved at board level I’m guessing, but it was absolutely blatant, talking up jobs and the economy and bagging the ALP for rolling back workchoices etc. Authorised by one “B. Henderson” for the Nats, Canberra. Surprising, as the ABC are usually quite careful with these things and even more surprising that it was the Nats who managed to do whatever deal to get it up. What have they got left to offer? Irrelevance?

Dansaid

Dougsaid

Vaile presentation was stock standard ABC requirement during an election campaign, probably in the legislation – all parties get a go depending upon their proportion of the vote…. cool it – no conspiracy here.

Martinsaid

George, re post #51, can’t remember exactly where I saw it…one of the main news bulletins I think. Cossie was standing right next to the rodent at the podium when he spat the dummy and refused to apologise…the look on Pete’s face can only be described as: “get me outa here”. it was a complete disaster – but even that paled into insignificance next to the look on the face of the corpse that unsuccessfully tried to retract its comments on camera several hours later. it is now official: the Coalition has been reduced to a complete rabble

blindoptimistsaid

The question here is why the lag? Is it because people do not change their sentiments until they actually have to make a increased mortgage payment? Or is it that the change of sentiment doesn’t show up until people are asked about their voting intention, regardless of when they have to part with more hard-earned.

Intuitively, I reckon the lag time is determined by the time between these two events. In the current circumstances, you would have to be in a coma to be unaware that interest rates are going up. It was news last week, on Monday, on Tuesday, yesterday and again today. John Howard has even being trying to make capital out of the rise, keeping the issue alive in the news even as he tangles himself up in the question of when is a promise not a promise and when is sorry not sorry.

So, a lot of voters are going to be fully aware that their disposable income is about to take a hit. And the next time they are likely to be asked how they feel about this will be when they go and vote.

So my prediction is a late extension of the swing to Labor, especially among the mortgaged and the credit-card dependant.

follow the preferencessaid

As there has never been a rate rise during an election campaign, if anything it needs to be seen in this unique context. Normally people are not thinking about their vote etc, its just a underlying effect. Now consider. people are clearly beginning to decide, Bang, along comes a rate rise, but with the context of the 2004 campaign where it was a defining issue. But what does it trigger, a notion that ‘Oh because the economy is strong its not Johns fault, or? This could well be the final straw in the credibility stakes.

Suspected Illegal Entry Vessel XIsaid

Well put Rod [44], spoken like a true psepho-anthroplogical outer suburbanite with a steep driveway. With enough of youse mob on the case, Toad of Toad Hall will have his licence well and truly revoked. Anyone for cricket? (bring out the bats!)

Harmless Cud Chewersaid

A lot has been said about approval ratings and economic manager ratings, but I think what Crosby/Textor left out was “do you Trust this person”. If they had added that dimension to their analysis, I think Possum would have had yet another interesting graph :)

Dianasaid

The headline for this article in today’s SMH is ‘Baby Boomers Carrying Rudd’. John Stirton notes the strong increase in support for the ALP by 40-54yr olds currently as compared to the last four Federal election campaigns.

Georgesaid

This next week’s polls were always going to be crunch time. Not just because of the interest rate decision but also because the absence of any sign of “The Narrowing” by the second last week will push JWH and Co. (including MSM associates) to the uttermost edge of their known world. As many of us have said here over the last few weeks if it’s this deep early next week expect a dog whistle, or a flat out scare. In fact, I’d bet on Downer or Abbott floating something on Sunday.

Troy Csaid

Neil, while Keating’s SMH letter was factually correct, it failed to explain why so many people lost their homes and businesses on his watch. My theory is that while Keating focuses on the average cash rate, it was the high watermark of 17% that really mattered — because if people can’t pay 17% then they face foreclosure, regardless of what the average is. I guess it’s a bit like floods and droughts smoothing out the “average rainfall” into some meaningless number. But credit must be paid where it’s due. Labor and its supporters in the blogosphere have done an impressive job in convincing everybody that life in Australia today is awful and oppressive … but was free and easy when Keating and Hawke were in charge. Yet, if you’d offered the electorate 15 years ago near-full employment and a mortgage rate of 8.5%, I reckon they’d have accepted it in a heartbeat. I realise I’ll be attacked for posting this message.

B1said

Georgesaid

Troy C, I’m not sure if you’ll understand where I’m coming from, but frankly I don’t care much for “economic management” (whatever the heck that means), for a range of reasons I wont go into here. I’m more interested in a commitment to even some social justice by Government, and hence why (for me) the Liberal party is never an option. The right wing parties bang on about implementing policies that will help people to help themselves, but when you understand about the low paid through to poverty underbelly in most western capitalist societies, you quickly see that creating environments for business activity and investment rarely helps those without even basic access to health, education, let alone business opportunities.

Jesssaid

Rodsaid

The Oz has always had its fair share of neocon bag men and women, of course, but there has usually been a bit more to be seen from a few “moderates” to provide at least a little balance. With Matt Price out of the mix (hopefully only for a while) it certainly changes the equation!

Georgesaid

stevetsaid

Troy C, I notice your comment about people losing their houses on Keating’s watch. I think it is important to point out to you that mortgage foreclosures are currently at a record high. Ergo, it seems the trophy goes to Messers Howard and Costello on this one.

Georgesaid

Enemy Combatantsaid

Get a load o’this, gang. Teh Furry One gets mentioned first amongst peers.

“The bloggers who have perhaps been most important and prominent down under are psephologists – specialist electoral statisticians who try to understand and analyse polls, and consider the interlocking numbers games of electoral politics.

Head counters like the anonymous Possum Comitatus, Simon Jackman, William Bowe, and Peter Brent produce accessible, incisive, original takes on polling, and engage in prolonged discussion with their readers about the meaning and import of their analysis.” ABC Online.

“Most important and prominent”, eh?
Well done, son! Bloody well done. Naturellement, we already knew.

[…] in the cash rate and the ALP’s primary vote on Wednesday, and on Thursday followed it up with a patient explanation of the statistically significant relationship – and the time-lag – between rate rises and […]

Enemy Combatantsaid

“Perhaps just feeling the need for some polly spleen venting – this is your place.”

Re Howard’s Penrith shopping centre chivalry and the manner in which HE has decided to let faithful Party acolytes and stooges fend for themselves outside The Firewall in the last desperate days of The Rat Empire. The writing’s from Bill Burroughs but its relevence echoes with Nicholson’s animated cartoons in Rag Rupert, as well as the men women and children who were “watchfully abandoned” when SIEV-X disappeared from the radar blips of RAN vessels under Howard’s orders.

“Somewhere in the shadow of the appalling Titanic disaster
slinks–still living by the inexplicable grace of God–a cur
in human shape, to-day the most despicable human being in
all the world.

In that grim midnight hour, already great in history, he
found himself hemmed in by the band of heroes whose watchword
and countersign rang out across the deep–“Women
and children first!”

What did he do? He scuttled to the stateroom deck, put
on a woman’s skirt, a woman’s hat and a woman’s veil, and
picking his crafty way back among the brave and chivalric
men who guarded the rail of the doomed ship, he filched a
seat in one of the life-boats and saved his skin.”

Chris Lloydsaid

There are a couple of technical problems with your statistical analysis poss. First, it is really not OK to take first differences and put them into a regression. The reason is that the differences are correlated. For instance, if the underlying support for the ALP si constant and there is an unusually high poll results in March then the positive March change is likely to be followed by a negative April change. I know that the finance guys throw differences into regressions but that is because the EFH says that the differences are uncorrelated. This is not the case with non-financial data. If you look at your DW statistic it is greater than 2, which implies negative correlation. I am surprised it does not come out to be even higher. But the good news is that negative correlation means that the P-values you quote under-estimate the statistical significance. In other words, your estimate 7.10 has a P-value even smaller and 0.0068.

BTW: As a matter of interest the T-statistic of 2.52 from the regression is just the ordinary t-test statistic for comparing the four months where there was a interest change to the others when there wasn’t.

So bottom line is this doesn’t matter for your conclusion. What matters much more is that you have gone on a “fishing expedition” trying to discover the relationship (if any) between ALP vote and IR changes. Regressing on this months change doesn’t work. So I will try last month. Why not the month before, or the month before that? The pain of an Increase in rates will tend to accumulate over time. It might be 6 months before someone in mortgage stress really starts to feel the difference and blame JH.

In assessing the significance of the lag-1 terms that you identified, you need to look at a model that includes all terms you could reasonably consider and then look at the overall ANOVA F-statistic. I suspect that the P-value will not be nearly as impressive as 0.0068.

Anyway, I am being a picky dickhead! I am sure you have a day job and don’t have unlimited time to do a perfect statistical analysis on the fly. I think it is great that you are bringing some empirical discipline to the political discussion.

It might be interesting to look at how the variable “time since last interest rate increase” affects TPP.

Possum Comitatussaid

On using first differences, this is probably the key reason I generally use monthly data, as the monthly data contains the average of more than one poll.

So while using monthly average data would substantially reduce the oscillating nature of the series, it doesnt completely remove it all of the time.This is just one of a number of small problems in trying to do any empirical analysis on polling series data that we arent sure is true, but we know is pretty close to being true. So we really have to make the assumption that the average monthly series is a true representation of political opinion in that month, even though it probably isnt exactly true, but also while aknowledging that it is far more likely to be true than any individual poll in that month.

The monthly average series is the reason why the DW is a little over 2 not a lot higher as you would expect, because the negative correlation has been substantially reduced by the averaging process.That little over 2 value is quite a reoccuring DW value in polling regressions.

But as you say, in reality it just underestimates significance. I can live with that – actually I have no choice but to live with it ;-) It’s far better than the reverse.

On testing for the cumulative nature of rate rises, unfortunately the effects over time get washed out by other events, so it becomes impossible to separate out the rate components part from other issues.

With the ANOVA stuff – the big problem there is with the best specced model.The best specced model for the ALP vote uses PM dissatisfaction as a key variable. Yet the cash rate appears to seriously contribute to that as well – but since the PMdissat and cashrate are correlated over time the whole thing becomes an exercise in blech… if you get my drift!

Unfortunately there is no actual set of statistical processes that work perfectly with polling data because the data itself contains so much uncertainty, its inertial and its very very laggy. So the best I can do (but am certainly open to suggestions here) is to play around the edges with it and make a few assumptions about the data to be able to pull out fairly accurate relationships, even if not as accurate as one could achieve with more ordinary types of data like basic economic data.